If you are like other investors, you would like to understand risk and make informed decisions about your investments, no matter what the size. Just like the stock market, Forex trading faces upward and downward swings which traders should be aware of. However, the good news is that Forex trading has a way of reducing the risks which come with such fluctuations. Forex signals are used to forecast the time and magnitude of currency dips. The signals are basic indicators of currency pair prices and the best time to venture into the market. These indicators come in pairs in the same way trading currencies do. There are 2 ways used to generate said signals. First is the use of human experts who have analytical skills and experience with the trading data. The second method is through the use of Forex software which automatically comes up with prediction charts and tables.
If you are wondering where to get these signals, they are provided by third party sources that are part of the Forex market. They give you guidelines on the best currency pairs and peak times. A general direction for the favorable signals is the major currencies which are trending on daily basis. It is easy to predict the performance of major currencies and traders tend to choose them over minor currencies. However, you should be aware of the risks you take with every investment you make. It is not a 100% guarantee that the market will behave as predicted. You are always the best bet to make a conscious decision to avoid the market’s pitfalls.
Here are a few guidelines that will minimize your trading risks.
Know the risky signal pairs
As said earlier, there is a level of risk in every investment you make. Forex trading and signals are no exceptions. The risky signal pairs tend to be from the currencies which fluctuate without any warnings. They just sink low in a moment when you thought they would keep the upward trend. Any pair with the Japanese Yen is volatile and this increases the risk of trading in it. Therefore, the riskiest pairs are EUR/JPY and USD/JPY. Nevertheless, these pairs can be the most profitable if the timing is perfect. This is because they have the widest spread in any Forex market.
The least risky - most profitable pairs
The best Forex signals are made up of a pair of 2 two major currencies. Their less risk element comes from the fact that they are stable and can withstand sudden market shocks. The EUR/USD pair is the most stable, profitable and least risky across all Forex platforms. This comes from the fact that the pair has the least market spread as opposed to the shaky pairs. In a single day, the pair of EUR/USD can move for more than 100 points and undergo sudden changes as it adjusts to the market. Financial experts attribute these sudden changes to the fact that the currencies in question are from 2 major global economies which face abrupt economic readjustments.
Establish your best trading pattern before you choose a signal pair
Choosing the most profitable signal pair is just the beginning. Afterward, you will need to decide how you wish to trade. If you are a day trader, shorter sessions are the best to make maximum profits. You will only take a few hours of trading and with perfect timing, you have the highest chances of making huge profits. It is recommended that you stick with a single pair of currency for these shorter trading sessions and time frames. The advantage of sticking to one pair of currency is that you will not be subjected to a wide market spread. Top of your choice should be the pair of EUR/USD which is the most stable. You can also stick with GBP/USD, a pair that enjoys close to what the former gets from the market.
You do not have to get stuck with a single pair all the time
You might be aware of the business phrase that the more risk you take the more reward you reap. As a day trader, the EUR/JPY pair can be a potential game changer. The risk is high but with good timing you can invest and make a quick killing. If you are a long time trader, the flexibility with pairs gets even better. You have the freedom to jump from one pair to the other as long as you have read the chart and premeditated your every move.
Factors you should consider
Never forget that the position on every offer you get plays a key role to your success or failure. This means that your willingness to take the risk on offer makes or breaks your investment. After all, the size of each risk depends on the lump sum amount you are willing to invest at one given time. Depending on the prevailing conditions, sometimes you can make more from small investments which have high profit margins. That does not mean that you have to ignore big trade offers for the sake of it. It means that you have to scrutinize each offer before taking a step to invest. There is never the play of luck in this entire game; it all boils down to being smart about every move you make. Forex signals can help you to some extent but the bigger stake lies in your ability to spot a golden chance and go for it before the odds are reversed.
The Forex market is one of the most competitive business arenas around the globe. This means giant Forex signal providers will be attracted to the game. Therefore, anyone can make big money in a short span of time. But while that should make you happy, it should also make you wary. The money made here attracts unscrupulous traders and other 'supportive service providers’. You should be on the lookout for these types.
Not everyone is out to do good business in the Forex niche. So, when you are picking that Forex signal provider, you should double check their background. Getting a genuine signal provider is good for your business. You will get the best investment counsel and come across fewer risks than you would if you went in it all alone. Remember whichever signals you go for, there is always an element of risk and you can minimize risk with a trusted provider.